Smart TV Trends in 2013

EDITOR’S NOTE: This article, originally published on January 10, 2013, placed at No. 2 in our 20 most popular articles of the year.

ADOTAS – The world of TV is rapidly evolving and over the past two years, we have seen introductions of a multitude of Smart TV models from major TV manufacturers. New functionalities and applications are being launched on a regular basis, and it’s difficult to see the major market trends among all the different messages from manufacturers and solution providers. Here is Accedo’s take on how the Smart TV market will evolve in 2013.

The emergence of Smart TV

Smart TV devices can be connected to the Internet, and via an integrated app platform, it is possible to use TV-centric applications to consume video, music and other content. New apps are launched regularly to the extent that a Smart TV is almost the equivalent to a set-top box but with a focus on the on-demand functionality. By the end of 2012, there will be more than 100 million consumers globally who regularly use Smart TV applications, and leading TV companies like Samsung, LG, Sony, and Panasonic are rapidly adjusting their model range to include new functionalities and applications to make the experience more attractive for consumers.

The first generations of Smart TV show all the typical signs of an emerging technology, suffering from fragmentation and limitations in user experience, but still showing rapid innovation from all players in the market. Innovation is continuing at a rapid pace and we currently see a number of key trends for 2013, which are explored in more detail below.

Smart TV companion applications

Over the past 12 months, we’ve seen rapid growth of Smart TV devices, both in terms of installed base and usage. The usage growth of tablets and mobile phones as a “second screen” while watching TV has been even more remarkable. Up to 70 percent of tablet usage is in the home, with the bulk of this usage in the living room.

Parallel usage of an interactive second screen while watching TV has exploded. Consumers increasingly use social media, send email, browse the Internet for information about the content they’re watching or in some cases, they play games or consume other content simultaneously.

This trend will continue, but Accedo sees one major change to this. Instead of leaving the consumer with a decoupled TV and tablet experience, it will be possible to connect your devices together to provide an integrated experience. We believe that most major video services will offer this pairing possibility between devices, which will allow for use cases where the second screen complements the TV experience rather than competes for attention.

Full Pay TV Experience on Smart TV

The technology already exists that can be leveraged to create a pay TV application on a Smart TV. When this application is launched, you will effectively be able turn your Smart TV into a distribution device for pay TV, including programs, linear channels and on demand offerings. Internationally, pay TV companies like Viasat, Foxtel and Sky are providing Smart TV services, which can be accessed without being a normal pay TV subscriber. The trends vary from country to country depending on market structure, content rights and strategies among the major distributors in each market, but it is clear that we will see an increased amount of pay TV providers launching Smart TV applications. In the short term, the main driver for the pay-TV providers will be to improve subscriber loyalty, and the long-term benefit will be an increased reach for a lower subscriber acquisition cost. Close partnerships between TV manufacturers and pay TV operators will emerge in some markets to promote new offerings for mutual benefit.

Niche content players start exploring Smart TV

One of the most attractive features of Internet distribution of content is the possibility of reaching the right audience with a lower cost structure than in broadcasting. Smart TV offers the possibility of viewing this content in the living room on the big screen exactly where consumers would like to view it. This is particularly attractive for multinational providers of content, since they can reach essentially the entire world with one distribution agreement with a Smart TV manufacturer. With clever marketing strategies, this is an attractive way to reach any consumer anywhere.

Two examples of providers of niche content from Accedo’s customers are EpicTV, a leading pan-European extreme sports channel and Neon Alley, a provider of Japanese anime videos. These companies provide a selection of high quality content, which cannot easily find distribution via traditional broadcasting due to the niche target group. Smart TV devices provide an attractive way for them to reach consumers in the living room.

Increased competition among movie services

If we were to choose one winner of the Smart TV trend, it would be the movie buff. Already in 2011 and 2012, a number of major film on-demand services have launched Smart TV applications. In some markets, consumers already have five or six services to choose from with additional services on the horizon in 2013. It’s difficult to imagine that only five years ago most consumers were stuck with DVD rentals and recording TV channels as their main home movie services. Consumers have rapidly come to expect a range of attractive new and library titles available directly to their TV. Of course, companies will have to compete with price and the selection, which will ultimately benefit the consumers. Growth, which is already high, will continue to ramp up in 2013. We will see aggressive marketing campaigns and investments in the user experience and content portfolio to capture the mass market before any competitors do the same.

Platform standardization will not happen in 2013

As previously mentioned, market growth is very high, with an estimated doubling of number of households who actively use Smart TV application at the end of 2013. The main hurdle for most companies launching Smart TV applications is the multiple platforms that are available on the market. Content providers need to sign distribution agreements with each manufacturer and then develop and launch applications on multiple TV platforms. All TV manufacturers are adding new functions and features to their platform to stay competitive in the global TV market. The rate of innovation is very high, and is expected to remain high over the coming 2-3 years. Accedo believes that the Smart TV technologies will remain fragmented in 2013 and 2014. However, with technologies and platforms maturing, porting of applications between different Smart TV platforms will be more attractive and easier to maintain over time.

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Michael Lantz is the CEO of Accedo, the global leader of TV apps and app store solutions. Accedo has deployed more than 300 Smart TV apps on more than 15 platforms.